Let’s talk about biotechnology. These securities present a unique set of appeals to investors, particularly investors willing to take on some additional risk. For starters, biotech companies have notoriously high overhead costs and equally long lead times for product development. But that’s balanced by the opportunity for huge payoffs—sales profits and share appreciation—when a new drug shows strongly positive clinical trial results or receives regulatory approval for marketing.
As an example, just last week Ambrx Biopharma saw its stock increase by a whopping 1007% in one day. That huge gain came thanks to overwhelmingly positive results from a Phase 2 clinical trial in the treatment of metastatic breast cancer. The company’s drug candidate got a boost, but shareholders were the immediate winners, as the value of their holdings skyrocketed.
Not all biotech stocks will go up 1000%, but it’s not uncommon for these stocks to double on positive news. The risk, of course, is that these shares could fall as much if a clinical trial fails or a government regulator denies approval. Luckily for biotech investors, the ranks of Wall Street stock analysts include biotech experts, who know how to distinguish.
And that brings us to Needham analyst Ami Fadia, who looked at two clinical-stage biotech stocks that show the potential to double, should their upcoming catalysts show positive results. Using TipRanks’ database, we found that the rest of the street is on board as well, as each one boasts a “Strong Buy” consensus rating.
Theseus Pharmaceuticals, Inc. (THRX)
We’ll begin our look at Theseus Pharmaceuticals, a clinical-stage company focused on cancer research. Specifically, Theseus is working on the development of tyrosine kinase inhibitors (TKIs), as a novel therapy with the potential to “outwit” treatment-resistant cancers.
The Theseus development pipeline currently has three tracks, two in discovery and preclinical stages, and one, THE-630, is in human clinical trials.
THE-630 is a potential treatment for gastrointestinal stromal tumors (GIST) that have proven resistant to existing treatments. The drug candidate is currently undergoing a Phase 1/2 dose expansion and escalation trial, with Phase 1 site activation completed during 3Q22 and patient enrollment ongoing. The company expects to release initial safety and pharmacokinetic data during 2Q23, with additional Phase 1 data to be released in 4Q23.
In the pre-clinical phase, THE-349 has met its development milestones and Theseus plans to submit the IND for FDA approval during 2H23.
Based on the potential of the company’s drug candidates, Needham’s Ami Fadia believes now is the time to get in on the action.
“Although 2L GIST has been a challenging space for drug development, we believe THE-630 has the potential to beat [Pfizer’s] Sutent in a H2H study in 2L GIST and has a pathway of approval in 5L, as it preclinically inhibits all known activating and resistance mutations. We estimate ~$1.2 billion in sales in 2035…THE-349, also developed using the PRA, pre-clinically targets all desired single, double, and triple mutants for a fourth generation EGFR + NSCLC inhibitor. We estimate sales of > $2Bin 2035,” Fadia said.
These are solid sales estimates and Fadia uses them to support her buy assessment. His $22 price target suggests Theseus has a robust 275% upside ahead of him. (To watch Fadia’s track record, Click here)
While there are only 3 recent analyst reviews on record for THRX, all agree this is a Buy, making the Strong Buy consensus rating unanimous. The shares are trading at $5.87, and their average price target of $20.67 indicates impressive upside potential of 252% over the one-year horizon. (See THRX stock forecast on TipRanks)
Cogent Biosciences, Inc. (COGT)
The second biotech stock we’ll review, Cogent Biosciences, is working on precision therapies for genetically driven diseases, including various types of cancer. The company has a drug candidate, bezuclastinib, in several concurrent clinical trials in the treatment of both advanced and non-advanced systemic mastocytosis, as well as gastrointestinal stromal tumors.
Cogent recently initiated a major clinical trial; PEAK, a Phase 3 study of bezuclastinib in combination with sunitinib versus sunitinib monotherapy, is ongoing against GIST. The first datasets of the PEAK study will be available during 1H23.
Bezuclastinib is also being investigated in the treatment of advanced systemic mastocytosis (AdvMS). The Phase 2 APEX study is ongoing and early data from that study are being used to support the protocol for the SUMMIT, randomized, double-blind, placebo-controlled, global, multicenter, Phase 2 clinical study of bezuclastinib in patients with non-advanced systemic disease mastocytosis (NonAdvSM). SUMMIT data should be ready for presentation in 2H23.
Needham’s Fadia examines the company’s sales potential and likes what she sees. Noting that clinical trials are ongoing and promising, she writes, “In AdvSM, bezuclastinib may have similar efficacy with better safety than BPMC’s Ayvakit, particularly on ICH, as supported by APEX data. In non-AdvSM, bezuclastinib may have better efficacy than Ayvakit with similar safety. We model 2030 sales of >$1.2 billion.”
“In 2L GIST, bezuclastinib’s mutational coverage is complementary to the current Sutent SoC, such that their combination should improve outcomes over Sutent, provided safety is acceptable. We model 2030 sales of ~300 million dollars,” the analyst added.
With potential sales by the end of the decade reaching $1.5 billion or more, Fadia rates COGT stock as a Buy. It sets its price target at $24, which implies room for the stock to appreciate about 100% over the next 12 months.
All in all, Cogent’s 3 most recent analyst reviews are all Buys, by a Strong Buy unanimous consensus, and the $24 price target matches Fadia’s. (See COGT stock forecast on TipRanks)
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Disclaimer: The views expressed in this article are solely those of the analysts featured. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.